Old debt (on its seventh year) now saying they will file...

Whatever they file is on this years taxes!(2008) It is too late for them to file against 2007. I would send them a debt validation letter and make the prove that the debt is not beyond the statute of limitations and that it is yours, that they have the right to collect it. that they are licensed in your state as a collector and how they arrived at the amount they say you owe.

In Operaphantom2003's position, I'd welcome a 1099-C on a debt [assuming it were actually my debt].

Reasons:

1 - In his tax beacket, $800 in 'income' won't hurt him. Standard deduction will still leave him an AGI of $0. He'll still get everything back.

2 - A 1099-C would provide an absolutely irrefutable proof that the debt was discharged. And since it becomes part of his tax return, they can't pretend it never happened.

Have a question, about debts that have been on my Credit Report for a while...some 5, 6 or 7 years. Soemone told me, if 'you' make arrangements to pay that debt off NOW, the SOL 'starts all over again'. Is this true?

Yes. Any payments made will restart the clock...honestly if you want to pay them off, let them fall off your report, then make a settlement offer with the CA (after you have DVed em of course!) :D

You could also send a pay for delete letter, basically you are agreeing to pay if they in return would remove the items from your credit report. Whatever you do, get it in writing and after you DVed em.

Once they receive the validation letter they have to validate before they can file the 1099c.